Summary
In this case, the Court of Appeals affirmed a ruling of a South Carolina
District Court limiting to US$500 a shipper’s recovery of damages pursuant to
the US Carriage of Goods by Sea Act 1936 ("COGSA") for damages
suffered by a drilling rig when it was off-loaded at an intermediate port so it
could be restowed on a lower deck for security purposes. The Court held that
COGSA’s limitation of liability applied until the goods were released from the
ship at the final port of destination and that the restowage of goods at an
intermediate port did not constitute a discharge within the meaning of COGSA.
The Court limited its ruling, however, to make clear COGSA would apply to goods
transported by sea but damaged on land only if there was a sufficient connection
between the activity which caused damage to the goods and their carriage by sea.

DMC Category Rating: Developed

Case Note Submitted by Nikki Lee, an attorney with Healy
& Baillie, LLP, New York. Healy & Baillie are the International
Contributors to the website for the United States of America

Facts
The shipper, Schramm, sued the carrier, Shipco Transport, in the
District Court to recover damages for destruction of a mobile drilling rig. The
shipper sold a mobile drilling rig to a South American company and arranged to
have the carrier, a non-vessel operating common carrier, transport the rig from
the Port of Baltimore, Maryland, to the Port of Arica, Chile, via an oceangoing
vessel. The carrier subcontracted with the owner of the m/v "CSAV Guayas"
to transport the rig to Chile. The drilling rig consisted of a large drill and
the truck on which it was mounted. The rig was secured on a flat rack container.
The carrier issued a clean bill of lading to the shipper to cover transport of
the rig and, in a paragraph entitled "Package or Shipping Unit
Limitation", the parties "agreed that Shipco’s liability would be
limited to US$500 per package wherever COGSA was applicable, ‘unless a
declared value has been noted’ by the parties." The shipper left the
space for "Shippers Declared Value" blank.

During a stop at an intermediate port in Charleston, South
Carolina, the vessel’s operator had ordered the rig off-loaded so that it
could be restowed on a lower deck of the vessel to avoid pilferage of goods at
subsequent ports and damage to them during the voyage. The rig, still attached
to its flat rack container, was placed on a chassis for dockside transport.
While it was being moved, the rig fell off the chassis and was damaged beyond
repair. Schramm claimed the amount of approximately US$176,800, which
represented

the
purchase price and related costs paid by Schramm’s insurance carrier to the
buyer of the rig, whereas the carrier claimed that its liability was limited to
US$500 either by COGSA 46.U.S.C. app. § 1304(5) or by the contractual bill of
lading.

At first instance, the South Carolina District Court found in
favour of the carrier. The shipper appealed.

Judgment
COGSA covered "the period from the time when the goods are loaded on to
the time when they are discharged from the ship." 46 U.S.C. app. §
1301(e). This period is commonly referred to as "tackle to tackle."
The Appeal Court, upholding the District Court, interpreted the term
"discharged" under COGSA to mean the removal of goods from the ship at
their final port of destination, and not the temporary removal of goods for
restowage operations. The Court found that its interpretation of
"discharge" under COGSA was consistent with (i) the language of COGSA
itself, (ii) COGSA’s interplay with the Harter Act, 46 U.S.C. app. § 1311;
and (iii) the realities of maritime practice.

First, COGSA provided that a carrier must "properly and
carefully load, handle, stow, carry, keep, care for, and discharge the goods
carried." The court concluded that this provision easily included - as one
of the carrier’s duties - the restowage of goods at an intermediate port,
since COGSA specifically applies to stowage activities. Second, the court
concluded that the construction of COGSA in light of the Harter Act suggests
that the point of discharge under COGSA is at the final port of destination.
Absent a contractual agreement to the contrary, the Harter Act applies prior to
loading, COGSA applies from the loading of the goods until the discharge of the
goods from the vessel, and the Harter Act then again applies from discharge
until the goods are delivered to the consignee. Third, with the advent of
containerized shipping, restowage of goods at intermediate ports is now a
customary activity in the maritime trade.

While the Court ruled that COGSA covered the temporary unloading
of goods at an intermediate port, it limited its ruling to cases where there
existed a sufficient link between the activity which caused the damage and the
carriage of the goods by sea. The Court noted that this would have been an
altogether different case if, for instance, the cargo had been damaged in
circumstances far removed from customary maritime activities.

These Case Notes have been prepared
with care, but neither the Editor nor the International and other Contributors can guarantee that they are free from error, nor
that they contain every pertinent point. Reliance should not therefore be placed
upon them without independent verification. The Editor and the International and
other
Contributors disclaim all liability
for any loss of whatsoever nature and howsoever arising as a result of others
acting or refraining from acting in reliance on the contents of this website and
the information to which it gives access. The
Editor claims copyright in the content of the website.